Doing Business with the Feds: What it takes to win a U.S. government contract

Back to all posts

Thursday November 13, 2014

Doing business with the federal governmentThe U.S. federal government spends a lot of money on just about everything, so it’s an enticing market for Canadian SMEs.

But it can take 18 to 24 months of solid work — and more than US$130,000 — to win a first U.S. federal government contract, says Judy Bradt, CEO of Summit Insight, which provides strategic advice and consulting to businesses.

“The good news is that two-thirds of companies report winning more than one additional contract within a year of winning the first one,” she said. But it’s a two- or three-year cycle before you hit the “hockey stick part of the curve,” so you have to be prepared to spend time and money — at a time when the government is not spending money.

Deciding if it makes sense

The first step, however, is to decide if it even makes sense to enter the U.S. market. A small or medium size business owner should consider whether it fits their business strategy, and if they have the money, time, people and commitment to follow through. “About 30 per cent of the time the answer is no, and that’s okay,” says Bradt.

“The question is not so much whether the U.S. federal government buys the product or service that you offer, but whether or not the effort to sell it to them is actually good for your business.”

Research is key

If you decide to go for it, then do your research. “You would not step onto a hockey rink if you did not know the rules of the game — you’d get pummelled,” she says. “It’s the same deal here.”

Anyone can find out online — for free, right now — of exactly how much the U.S. federal government spent with individual vendors on every single contract worth more than US$25,000 (at www.usaspending.gov.)

“One of the great things about a federal government system that buys over US$450 billion worth of stuff is that every federal agency publishes a forecast of what they’re going to buy,” says Bradt.

Typically you’ll find line items that include what they’re going to buy, how much they plan to spend and when they plan to spend it, as well as contact information.

But what your company supplies might be part of a bigger project. “If you do agile systems development, you might not see a line item for ‘agile systems development’ but you might see ‘big, major, honking IT project,’” she said. “You have to look at these forecasts creatively.”

Research federal agencies that are similar in size, scale and scope to your sweet-spot clients right now, says Bradt.

It’s essential to show potential buyers that you’ve “already solved their problem for someone who looks just like them, yesterday afternoon,” she says. “Past performance matters a lot.”

A federal government office can help Canadian SMEs

But small businesses have an added advantage. Because the U.S. federal government offers programs for small businesses, it has a system of small business specialists in the Office of Small and Disadvantaged Business Utilization (OSDBU).

“There are thousands of them — they are in every department and agency,” says Bradt. Even though a small business based in Canada does not meet the definition of “small” under federal acquisition regulations, those small business specialists are still the first point of contact for guidance and assistance for Canadians.

For Canadian manufacturer, Krug Inc., persistence paid off

Small businesses that have been successful in selling to the U.S. federal government tend to start small and be persistent.

Krug Inc. is one of those companies. The Kitchener-based office and healthcare furniture manufacturer entered the U.S. market in the early ’80s, and now 85 per cent of its business comes from the U.S.

“We’re the largest non-U.S. supplier of office (furniture) to the U.S. federal government,” says Mike Boehmer, vice-president of government sales with Krug Inc.

Right now the U.S. market is difficult, he says, thanks to huge government spending cutbacks. “I’m not saying there aren’t opportunities because there are, but it’s a tougher market now than it ever has been.”

So Canadian small businesses have to be proactive, because it can take a year or two and a “tremendous amount of paperwork” just to get in the game. Even then, business isn’t just going to fall in your lap; you have to get out there and sell the old-fashioned way.

When they first entered the U.S. market, they misinterpreted some of the required documents. “We learned the hard way,” says Boehmer. “We lost the argument with the GSA but we took the high road.” While they were denied the initial contract, they learned from their mistake and went on to successfully do business with the U.S. federal government.

That’s where a consultant can help, he said, or someone in the company who is willing to devote the time to understanding government contracts (and there are thousands of pages of regulations to wade through).

While federal spending is down, the U.S. economy is picking up. “So get involved now,” says Boehmer. “The seeds that you plant, you’ll reap down the road — you just have to marshal through it.”

Expand in the USA newsletter and archive

To learn more about Canadian SMEs’ experience in this area, and to read more articles about Canadian companies expanding in the U.S., subscribe to the free, Expand in the USA newsletter.

Expand in the USA conference

Registration opens November 20, 2014 for the two-day conference, Expand in the USA, being held at The International Centre, in Mississauga, Ontario. The conference will be focusing on strategic planning and financing for small and medium size Canadian companies looking to achieve significant growth south of the border. See the agenda at: www.expandintheusa.com/agenda.